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THE 


DEPRESSION    IN    TRADE 


AND 


THE   WAGES   OF  LABOR. 


By   URIEL  H.   CROCKER. 


I*  » '» 


There  is  that  scattereth  and  yet  increaseth;  and  there  is  that  withholdeth  more 
than  is  meet,  but  it  tendeth  to  poverty. — Proverbs  xi.  24. 


BOSTON: 
W.   B.    CLARKE  AND   CARRUTH, 

340  Washington  Strket. 

1886. 


^7 


^[ni'bcrsftg  '^u%s\ 

JOHX   WiLSOX  AND   SON,  CAMBRIDGE. 


PREFACE. 


npHE  following  pages  have  been  written  for  the 
purpose  of  giving  a  full  and  connected  state- 
ment of  certain  arguments  and  conclusions  which  the 
undersigned  has  during  the  past  nine  years  brought 
in  various  ways  to  the  attention  of  the  public.  The 
first  presentation  of  these  views  was  made  in  a  commu- 
nication printed  in  the  "  Boston  Daily  Advertiser  "  of 
August  8,  1877,  and  that  communication  was  followed 
from  time  to  time  by  others  in  different  papers  and 
periodicals.  The  more  important  of  these  articles 
were  collected  in  a  pamphlet  entitled  "  Excessive 
Saving  a  Cause  of  Commercial  Distress,"  published 
in  June,  1884,  and  in  a  few  pages,  supplementary  to 
that  pamphlet,  printed  a  year  later. 

In  those  earlier  articles  attention  was  directed 
solely  to  the  cause  of  the  troubles  which  were  the 
subject  of  consideration,  and  the  proposal  of  any 
remedij  was  carefully  avoided.  This  course,  however, 
has  resulted  in  a  general  criticism  of  the  author  as 
one  who  had  proposed  to  remedy  the  mischiefs  of 
the  times  by  a  general  indulgence  in  ice-cream  or 
fireworks,   or   by   some    other   expedient   equally   ab- 

M  9759 


surd  and  equally  foreign  to  his  thoughts ;  and  it  has 

therefore  seemed  to  him  to  be  advisable,  in  the  hope 

of  avoiding  such  misconceptions  in  the  future,  to  add 

in   this   pamphlet,    to   the    argument   concerning   the 

cause  of  the  depression  in  trade,  some  considerations 

as  to   the  direction  in  which  we    ought   to   look  for 

relief  from   the    evils   that   have   resulted   from    that 

depression. 

URIEL  H.  CROCKER. 
April  26,  1886. 


THE 


DEPEESSION    IN   TRADE 


AND 


THE   WAGES   OF   LABOR. 


THE  general  and  widespread  depression  in  trade,  which, 
except  for  a  short  interval  of  business  prosperity,  has 
now  extended  over  a  period  of  twelve  or  thirteen  years,  has 
given  rise  to  much  discussion  both  in  this  country  and  abroad, 
and  more  especially  in  England,  where  a  "  Royal  Commission 
on  the  Depression  of  Trade  and  Industry  "  has  recently  been 
appointed. 

The  phenomena  which  are  the  evidences  of  this  depression 
are  generally  seen  and  recognized,  and  people  are  in  the  main 
agreed  as  to  their  character.  Few  persons  will  deny  that  more 
products  of  almost  every  description  have  been  created  than  it 
has  been  possible  to  dispose  of  at  a  profit  over  the  cost  of  pro- 
duction. Among  the  so-called  raw  materials,  more  iron,  coal, 
cotton,  and  wheat  have  been  produced  than  tlie  market  has 
seemed  to  call  for,  while  of  most  manufactured  products  greater 
quantities  have  been  turned  out  of  the  factories  than  could  be 
sold  except  at  a  loss  to  the  owners  of  the  factories.  It  has 
been  the  general  complaint  among  tradesmen  that  business  has 
been  dull ;  among  railroad  managers  that  their  roads  have  been 
earning  but  small  dividends ;  and  among  capitalists  that  they 
could  find  for  their  funds  no  investments  which  promised 
favorable  returns. 


These  phenomena,  however,  might  not  call  for  serious  atten- 
tion, except  for  certain  other  phenomena  by  which  they  have 
been  accompanied.  In  the  midst  of  all  these  evidences  of  plenty, 
in  the  midst  of  an  abundance  of  tlie  products  of  the  earth  and 
of  labor,  lai'ge  numbers  of  the  laboring  classes,  though  ready 
and  eager  to  work,  have,  by  reason  of  tlie  lack  of  any  demand 
for  their  services,  been  compelled  to  sit  in  idleness,  surrounded 
by  an  abundance  in  which  they  had  no  share.  This  has  cer- 
tainly been  a  condition  of  affairs  tliat  has  demanded  attention 
from  the  student  of  political  science,  —  a  condition  in  which 
general  abundance  has  existed  only  to  cause  general  embarrass- 
ment, in  which  the  rich  have  been  complaining  of  the  abun- 
dance, because  it  prevented  them  from  disposing  of  their  goods 
at  a  profit,  and  the  poor  have  been  complaining  likewise,  not 
only  because  the  abundance  caused  their  labor  to  be  unsouglit, 
but  also  because  it  spread  before  them,  as  before  the  eyes  of 
Tantalus,  the  things  which  they  longed  for,  but  were  not 
permitted  to  touch.^ 

1  The  suffering  from  want  of  employment  has  probably  not  been  in  recent 
years  so  severe  in  the  United  States  as  elsewhere,  but  in  the  first  annual  report 
of  the  Bureau  of  Labor,  recently  submitted  to  the  Secretary  of  the  Interior,  the 
Commissioner  (Hon.  Carroll  D.  Wright)  says  :  "  It  is  undoubtedly  true  that,  out 
of  the  total  number  of  establishments,  such  as  factories,  mines,  etc.,  existing  in 
the  country,  about  five  per  cent  were  absolutely  idle  during  the  year  ending 
July  1,  1885,  and  that  perhaps  five  per  cent  more  were  idle  a  part  of  the  time ; 
or,  for  a  just  estimate,  seven  and  one  half  per  cent  of  the  whole  number  of 
such  establishments  were  idle  or  equivalent  to  idle  during  the  year  named. 
According  to  the  census  of  1880  there  were,  in  round  numbers,  255,000  such 
establishments,  employing  upwards  of  2,250,000  hands.  If  the  percentage 
stated  above  is  correct,  and  it  is  believed  to  be  approximately  so,  then  there 
were  possibly  19,125  establishments  idle  or  equivalent  to  idle  and  168,750  hands 
out  of  employment,  so  far  as  such  establishments  were  concerned,  during  the 
year  named.  The  percentage  stated,  if  erroneous  at  all,  is  probably  too  large, 
because  the  idle  establishments  were  to  a  large  extent  small  and  poorly 
equipped.  In  some  industries  the  percentage  of  idle  establishments  would  be 
much  greater  than  the  average  given,  while  in  other  industries  the  percentage 
given  is  much  too  large.  Applying  this  percentage,  however,  to  the  whole 
number  of  people  employed  in  all  occupations  in  the  United  States,  which  in 
1880  was  17,392,099,  there  might  have  been  1,304,407  out  of  employment;  but 
this  is  a  number  evidently  too  large,  because  it  applies  to  all  occupations,  — 
those  engaged  in  agriculture,  professional  and  personal  service,  trade  and  trans- 


Many  theories  to  account  for  these  unusual  phenomena  have 
been  proposed.  In  this  country  it  has  been  said  that  the 
trouble  is  due  to  our  protective  tariff,  which,  it  is  claimed, 
has  limited  the  EQtarket  for  the  sale  of  our  products.  But  the 
fact  that  the  depression  has  been  felt  even  more  severely  in 
free-trade  England  than  in  the  United  States,  indicates  that 
tliis  theory  cannot  be  tlie  true  one.  In  England,  on  the 
other  hand,  it  has  been  urged  that  the  trouble  is  due  to  the 
free-trade  policy  of  that  country,  which  floods  it  with  the  pro- 
ducts of  other  nations.  But  those  who  urge  this  view  forget 
that  the  United  States,  whose  policy  is  to  exclude  foreign 
products,  have  been  suffering  from  the  same  trouble,  though 
perhaps  in  a  less  degree. 

The  professors  of  political  economy  have  told  us,  in  the 
language  of  Professor  Bonamy  Price,  in  the  "  Contemporary 
Review  "  for  April,  1877,  that  the  cause  of  our  trouble  "  is  one 
and  one  only,  —  over-spending,  over-consuming,  destroying 
more  wealth  than  is  reproduced  ;  and  its  necessary  consequence, 
poverty."  But  if  we  have  been  suffering  from  past  extrava- 
gance, if  we  have  been  "  destroying  more  wealth  than  is  repro- 
duced," surely  we  ought,  as  a  result,  to  have  found  ourselves  in 
the  midst  of  a  scarcity  rather  than  an  abundance  of  the  products 
of  labor,  and,  instead  of  there  being  any  difficulty  in  giving 

portation,  mechanical  and  mining  industries,  and  manufactures.  The  per- 
centage should  be  applied  only  to  those  engaged  in  agriculture,  trade  and 
transportation,  mining  industries,  and  manufactures.  There  were  engaged  in 
those  four  great  branches,  as  shown  by  the  census  of  1880,  13,317,861  persons. 
Applying  tlie  percentage  arrived  at  (seven  and  one  half  per  cent),  we  obtain  a 
total  of  998,839  as  constituting  the  best  estimate  of  the  possibly  unemployed  in 
the  United  States  during  the  year  ending  July  1,  1885,  —  meaning  by  the 
unemployed  those  who  under  prosperous  times  would  be  fully  employed,  and 
who,  during  the  time  mentioned,  were  seeking  employment,  — that  it  has  been 
possible  for  the  Bureau  to  make.  It  is  probably  true  that  this  total  (in  round 
numbers  1,000,000),  as  representing  the  unemployed  at  any  one  time  in  the 
United  States,  is  fairly  representative,  even  if  the  laborers  thrown  out  of  em- 
ployment through  the  cessation  of  railroad  building  be  included,  A  million  of 
people  out  of  employment,  crippling  all  dependent  upon  them,  means  a  loss  to 
the  consumptive  power  of  the  country  of  at  least  $1,000,000  per  day,  or  a 
crippling  of  the  trade  of  the  country  of  over  $300,000,000  per  year." 


8 

employment  to  all  who  wish  to  labor,  every  one  ought  to 
find  plenty  to  do  and  to  be  hard  at  work  in  making  good  the 
waste  of  the  past.  Indeed,  this  theory  is  so  far  at  variance 
with  the  facts  that  it  seems  now  to  have  been  abandoned. 

Another  favorite  theory  with  the  economists  has  been  that 
the  trouble  is  due  to  mis-production  ;  or,  in  other  words,  to  a 
foolish  over-production  of  some  things,  while  there  has  been 
a  corresponding  under-production  of  other  things.  But  this 
theory  also  may  fairly  be  set  aside  as  unsatisfactory  unless 
those  who  advance  it  are  able  to  point  out,  as  it  is  evident  they 
cannot  do,  what  the  articles  are  that  have  not  been  produced 
in  sufficient  quantities  to  meet  the  demands  of  the  times ; 
or  at  least  to  explain  how  it  is  that,  if  there  is  any  consider- 
able amount  of  under-production  (corresponding  to  the  evident 
over-production  of  many  articles),  the  scarcity  of  these  under- 
produced articles,  creating  —  as  scarcity  of  any  article  of  mer- 
chandise always  must  —  an  increase  of  its  price  over  its  cost 
to  the  producer,  has  not  in  all  these  years  attracted  the  atten- 
tion of  some  of  the  many  shrewd  and.  watchful  capitalists 
whose  money  has  been  lying  idle  for  want  of  investment,  and 
why  employment  has  not  thus  been  given  to  some  of  the  many 
laborers  who  have  been  unemployed  because  there  has  been 
no  demand  for  their  labor. 

Another  theory  is  that  which  has  been  persistently  advocated 
by  the  New  York  "  Commercial  and  Financial  Chronicle." 
This  paper  has  traced  all  the  trouble  to  the  disinclination  of 
the  business  community  to  engage  in  new  enterprises  by  reason 
of  a  fear  that  the  continued  coinage  of  silver  will  lead  to  a 
shifting  of  our  currency  from  a  gold  to  a  silver  basis,  whereby 
the  value  of  the  dollar  will  be  diminished  by  some  twenty  per 
cent,  and  much  confusion  and  disaster  will  be  brought  upon  all 
kinds  of  business.  The  objections  to  this  theory  are  numerous. 
In  the  first  place,  the  most  active  business  men  usually  trade 
on  borrowed  capital,  and  the  prospect  that  they  would  be  able 
to  pay  their  debts  in  a  depreciated  currency  would  naturally 


9 

induce  tliem  to  extend  rather  than  to  diminish  their  opera- 
tions. In  the  second  place,  common  observation  of  the  talk 
of  business  men  shows  that  the  prospect  of  trouble  from  this 
cause  is  to  their  minds  too  remote  and  too  theoretical  to  in- 
fluence largely  their  practical  conduct.  And  thirdly,  those 
who  are  accustomed  to  loan  money,  although  they  are  the 
class  who  are  sure  to  suffer  from  a  depreciation  of  the  cur- 
rency, and  although  they  are  always  on  the  lookout  for  any 
symptoms  of  a  coming  depreciation,  have  not  felt  and  ap- 
preciated the  danger  enough  to  be  prevented  from  loaning 
their  funds  at  very  low  rates  of  interest,  or  to  be  led,  except  in 
rare  instances,  to  insist,  when  making  a  loan,  upon  an  agree- 
ment from  the  borrower  that  he  will  repay  it  in  gold. 

Finally,  a  theory,  which  is  in  some  respects  more  plausible 
than  any  of  those  before  mentioned,  has  recently  been  advanced 
by  the  economists.  This  theory  represents  the  depression  in 
trade  to  be  due  to  the  demonetization  of  silver,  which,  by 
increasing  the  value  of  gold,  has  diminished  the  value,  as 
measured  in  dollars,  pounds  sterling,  or  francs,  of  all  other 
articles,  and  thus  has  discouraged  and  depressed  trade  by 
giving  it  a  continually  falling  market  for  all  kinds  of  mer- 
chandise. With  regard  to  this  theory  it  may  be  remarked, 
in  the  first  place,  that  the  improved  methods  and  increased 
facilities  for  exchange  and  for  the  payment  of  debts  without 
the  actual  use  of  currency,  which  have  been  brought  about  in 
recent  years,  must  have  gone  very  far  to  counteract,  if  they 
have  not  more  than  counterbalanced,  any  tendency  in  gold  to 
increase  in  value ;  secondly,  the  falling  market  was  the  natural 
result  of  a  cause  very  different  from  that  suggested  in  this 
theory.  It  necessarily  arose  out  of  the  cheapening  of  products 
caused  by  the  great  increase  that  has  taken  place  in  the  effec- 
tiveness of  the  machinery  of  production  and  distribution.  This 
increase  of  effectiveness  must  have  brought  about  a  great  fall 
in  the  price  of  every  article  that  is  produced  by  machinery  or 
transported  by  railroad  or  steamship,  and,  instead  of  seeking 


10 

for  a  different  cause  for  the  fall  in  prices,  we  may  well  wonder 
that  a  fall,  greater  than  that  which  has  actually  been  experi- 
enced, has  not  been  brought  about  by  our  factories,  railroads, 
and  steamships.  A  third  objection  to  this  theory  is  to  be 
found  in  the  fact  that  the  demonetization  of  silver  could  have 
increased  the  value  of  gold  pnly  by  increasing  the  demand  for 
the  latter  metal ;  and  tliat,  during  the  time  when*  this  demand 
was  increasing,  those  who  felt  the  increasing  want  of  gold 
must  have  been  willing  to  pay  more  liberally  than  before  for 
the  use  of  it ;  in  other  words,  must  have  been  ready  to  agree 
to  pay  higher  rates  of  interest  when  they  borrowed  it.  Under 
these  circumstances  the  general  rate  of  interest  would  have 
tended  to  be,  for  the  time,  higher  than  it  had  previously  been. 
But,  as  a  matter  of  fact,  the  last  ten  years  have  been  notable, 
not  for  high,  but  for  low,  rates  of  interest.  None  of  the  usual 
symptoms  of  a  scarcity  of  money  have  been  observed.  Specu- 
lators and  the  debtor  class  have  not  been  specially  embarrassed. 
There  has  been  no  unusual  number  of  failures,  and  no  general 
want  of  confidence  in  the  solvency  of  the  business  community. 
For  these  reasons,  this  theory,  like  the  others,  fails  to  meet  the 
conditions  of  the  problem.^ 

it  is  quite  coihmon  for  those  who  write  concerning  the 
causes  of  the  depression  in  trade,  to  begin  their  essays  on 
the  subject  with  some  remark  to  the  effect  that  many  people 
suppose  the  trouble  to  be  due  to  general  over-production  ;  but 
that  any  such  idea  as  that  could  be  entertained  only  by  igno- 
rant persons,  who,  if  they  were  acquainted  with  the  simplest 
principles  of  political  economy,  would  know  that  general  over- 
production is,  in  the  nature  of  things,  an  absolute  impossibility.^ 
When  the  theories  of  the  learned  conflict  with  popular  ideas, 

1  The  objections  to  this  theory  have  been  very  well  stated  in  an  article  by 
Dr.  Th.  Barth,  in  the  Berlin  "  Nation  "  of  Dec.  5,  1885,  a  translation  of  which 
article  appeared  in  the  New  York  "  Evening  Post  "  of  Dec.  30,  1885. 

2  Thus,  in  an  article  by  Moreton  Frewen  on  "  Gold  Scarcity  and  the  Depres- 
sion of  Trade,"  in  the  "  Nineteenth  Century  "  for  October,  1885,  we  read  :  "  People 
of  little  education  are  accounting  for  low  prices  on  the  hypothesis  of  a  general 
over-production;   but  it  is  hardly  necessary  to  point   out   that,   while   over- 


11 

it  sometimes  turns  out  in  tlie  end  that  the  learned  were  wrong 
and  the  people  right,  —  that  the  finely  drawn  arguments^  on 
which  the  former  built  their  theories,  involved  fallacies  fatal 
to  the  truth  of  their  conclusions,  while  the  rougher  reasoning 
processes  of  the  latter  led  them  by  a  sort  of  instinct  to  true 
results.  With  regard  to  general  over-production,  —  by  which 
is  meant,  not  a  production  in  excess  of  mankind's  readiness  to 
consume  if  products  were  to  be  distributed  gratuitously,  but  a 
production  in  excess  of  the  demand  which  is  backed  by  both 
the  inclination  to  acquire,  and  the  ability  to  pay  for,  the  things 
demanded,^  —  those  who  claim  that  such  over-production  is 
possible,  certainly  have  an  appearance  of  facts  in  their  favor. 
They  say  that  it  is  possible,  because  it  actually  exists  at  the 
present  time,  and  as  evidence  of  the  truth  of  this  assertion  they 
point  to  the  fact  that  the  chief  producers  in  every  branch 
of  industry  (and  these  men  may  well  be  supposed  to  be  ac- 
quainted each  with  the  state  of  the  market  for  his  own  pro- 
ducts) have  long  been  complaining  that  in  their  respective 
lines   of  business   over-production   actually   exists.      Factory 

production  in  any  particular  trade  is  frequent,  and  quickly  adjusts  itself,  general 
over-production  is  impossible."  And  Mr.  Edward  Atkinson,  in  an  address  on 
the  "  Statistics  of  Consumption,"  printed  in  the  Boston  "  Sunday  Herald  "  for 
July  5, 1885,  says  :  "  I  desire  to  examine  the  outside  of  the  head  of  any  one  who 
pleads  a  general  over-production,  in  order  to  see  how  his  brain  is  constituted, 
and  what  element  of  common-sense  has  been  omitted  in  his  make-up." 

1  That  it  may  not  be  supposed  that  this  definition  of  "  general  over- 
production" is  an  invention  of  the  writer  of  these  pages,  the  following  quota- 
tion from  Mill's  "  P^lements  of  Political  Economy"  is  given  :  —  "Because  the 
phenomena  of  over-supply  and  consequent  inconvenience  or  loss  to  the  producer 
or  dealer  may  exist  in  the  case  of  any  one  commodity  whatever,  many  persons, 
including  some  distinguished  political  economists,  have  thought  that  it  may 
exist  with  regard  to  all  commodities;  that  there  may  be  a  general  over-produc- 
tion of  wealth;  a  supply  of  commodities  in  the  aggregate  surpassing  the 
demand;  and  a  consequent  depressed  condition  of  all  classes  of  producers.  .  .  . 
There  may  easily  be  a  greater  quantity  of  any  particular  commodity  than  is 
desired  by  those  who  have  the  ability  to  purchase,  and  it  is  abstractly  conceiv- 
able that  this  might  be  the  case  with  all  commodities.  Tlie  error  is  in  not 
perceiving  that,  though  all  who  have  an  equivalent  to  give  might  be  fully  pro- 
vided with  every  consumable  article  which  they  desire,  the  fact  that  they  go  on 
adding  to  the  production  proves  that  this  is  not  actually  the  case."  —  "  Elements 
of  Political  Economy,"  by  John  Stuart  Mill  (Laughlin's  ed.),  book  3,  ch.  11. 


12 

owners  have,  for  this  reason,  been  working  their  factories 
below  their  full  capacity,  and  have  endeavored  to  reduce  the 
aggregate  of  production  by  mutual  agreements  with  others  in 
the  same  business,  whereby  the  products  of  each  should,  dur- 
ing a  certain  period,  be  limited  to  a  prescribed  amount.  If 
there  is  evident  over-production  in  all  the  more  important 
branches  of  business,  what  can  be  the  branches  in  which  there 
is  an  amount  of  under-production  sufficient  to  redress  the 
balance  and  leave  the  world  with,  on  the  whole,  no  excess 
of  production  over  consumption  ?  Unless  such  instances  of 
under-production  can  be  pointed  out,  it  is  evident  that  general 
over-production,  as  an  actual  and  existing  fact,  must  be 
admitted. 

If,  then,  general  over-production  is  apparently  an  existing 
fact,  it  will  be  well  to  examine  the  argument  which  has  been 
supposed  to  prove  it  to  be  in  the  nature  of  things  an  impossi- 
bility. The  argument,  upon  which  all  modern  economists 
rest  for  this  proof,  is  that  which  was  furnished  many  years 
ago  by  John  Stuart  Mill,  and  is  in  substance  as  follows: 
No  man  produces  anything  unless  he  expects  either  to  consume 
it  himself,  or  to  exchange  it  for  something  else  which  he  ex- 
pects to  consume  ;  in  other  words,  production  never  exists 
unless  an  equivalent  demand  for  consumption  exists  at  the 
same  time,  and  therefore  production  can  never  exceed  in 
amount  that  demand  for  consumption, —  can  never  be  developed 
into  general  over-production.  According  to  Mill,  those  who  as- 
sert the  possibility  of  general  over-production  are  involved  in 
the  absurdity  of  assuming  that  people  will  go  on  producing 
articles  which  they  do  not  expect  to  use  themselves,  or  to 
exchange  for  other  articles  which  they  do  expect  to  use;  and 
their  error  lies — to  quote  his  own  words — "in  not  perceiv- 
ing that,  though  all  who  have  an  equivalent  to  give  might  be 
fully  provided  with  every  consumable  article  which  they  desire, 
the  fact  that  they  go  on  adding  to  the  production  proves  that 
this  is  not  the  case." 


13 

This  reasoning  of  MilPs  is  very  plausible,  and  seems  at  first 
sight  to  cover  the  whole  case.  But  on  closer  examination  it 
will  be  found  that  it  fails  to  take  into  account  one  element  of 
human  nature,  and  leaves  one  road  open  by  which,  and  appar- 
ently by  which  alone,  general  over-production  can  be  reached. 
Mill  in  his  argument  assumes  that  the  sole  incentive  that  leads 
men  to  *'  go  on  adding  to  production  "  is  the  desire  presently 
to  obtain  "  consumable  articles,'^^  with  which  they  are  not  at  the 
time  "  fully  provided."  But  a  little  consideration  will  suffice 
to  convince  us  that  this  is  not  true,  —  that  production  may  be 
prompted,  and  that  a  large  portion  of  it  is,  in  fact,  prompted 
to-day,  not  by  this  desire,  but  by  a  desire  to  gain  what  may  be 
called  income-producing  investments.  Many  men  labor  to-day, 
not  so  much  that  they  may  consume  and  enjoy,  as  that  they 
may  grow  rich  through  the  accumulation  of  income-producing 
investments.  The  chief  opportunity  for  these  investments  is, 
directly  or  indirectly,  afforded  by  the  machinery  of  production 
and  distribution,  by  factories,  railroads,  steamships,  warehouses, 
etc. ;  and  it  is  the  desire  to  acquire  and  own  these  things  for 
the  income  to  be  derived  from  them  that  prompts  much  of  the 
production  of  the  present  time.  The  owner  of  a  cotton  factory, 
for  instance,  often  goes  on  producing  cotton  goods,  not  so  much 
that  he  may,  with  the  profits  of  their  sale,  obtain  other  con- 
sumable articles  for  his  own  use,  but  that  he  may  with  those 
profits  build  new  factories  wherewith  to  produce  still  more 
cotton  goods,  and  thereby  gain  further  profits.  Thus  we  see 
that  the  sole  object  of  production  is  by  no  means  the  imme- 
diate acquisition  of  articles  for  consumption,  as  Mill  assumes 
it  to  be,  but  that  production  is  in  large  part  due  to  the  exist- 
ence of  a  desire  to  increase  production  itself  through  an  in- 
crease of  the  machinery  by  which  it  is  brought  about,  and  that, 
so  far  as  production  is  stimulated  in  this  way,  it  cuts  loose 
from  the  present  demand  for  consumption  and  may  readily 
reach  an  amount  far  in  excess  of  that  demand, —  may,  in  a 
word,  become  general  over-production. 


14 

The  conclusion  just  'arrived  at  may  also  be  reached  by  a 
somewhat  different  line  ot  argument.  Let  us  suppose  that 
there  should  come  to  mankind,  through  some  great  religious 
or  social  movement,  a  large  and  sudden  development  of  the 
miserly  desire  to  gain  income-producing  wealth  at  the  cost  of 
present  comforts  and  pleasures  ;  that  the  desire  to  save,  and 
not  to  spend,  should  suddenly  become  a  universal  passion  in 
the  community  ;  and  that  all  people,  the  rich  and  the  poor 
alike,  should  begin  to  live  in  the  most  economical  and  meagre 
manner,  should  eat  only  the  simplest  and  cheapest  food,  should 
wear  their  old  clothes,  should  abstain  from  indulging  in  aught 
that  was  new,  and  should  deny  themselves  all  amusements 
and  recreations ;  and  that  they  should  do  all  this  with  a  view 
to  the  acquisition  of  income-producing  wealth  in  the  shape  of 
new  factories,  railroads,  ships,  and  warehouses.  Is  it  not  evi- 
dent that  under  these  circumstances  there  would  be  an  immense 
development  of  the  machinery  of  production  and  distribution, 
and  at  the  same  time  an  equally  large  diminution  of  the  con- 
sumption of  the  articles  which  tliat  machinery  was  intended  to 
create  and  to  distribute  ?  If,  before  this  movement  began, 
production  and  consumption  had  been  equal  in  amount,  it  is 
evident  that  the  balance  w^ould,  as  the  movement  proceeded, 
be  quickly  disturbed,  and  that  there  would  speedily  be  devel- 
oped a  large  degree  of  general  over-production. 

These  arguments  certainly  show  that  general  over-produc- 
tion is  not,  as  Mill  has  been  supposed  to  have  proved,  and  as 
modern  economists  assert,  a  thing  absolutely  impossible  so 
long  as  men  do  not  labor  for  the  mere  pleasure  of  laboring ; 
but  that,  on  the  contrary,  it  must  necessarily  arise  in  a  state 
of  society  in  which  certain  passions  and  motives,  which  are 
recognized  by  all  as  everywhere  active  and  powerful,  should 
receive  an  excessive  and  undue  development. 

It  may  be  objected  however,  that,  though  it  is  perhaps  con- 
ceivable that  the  desire  to  acquire  income-producing  wealth 
might  under  certain  imaginable  circumstances  reach  such  a 


15 

development  as  to  bring  about  a  general  over-production,  it 
is  not  possible  that  the  action  of  this  desire  can  have  been 
so  powerful  in  recent  years  as  to  have  caused  any  such  result 
at  the  present  time.  But  if,  as  we  hope  is  the  case,  we  have 
satisfied  the  reader  that  general  over-production  actually  ex- 
ists, and  that  it  may  under  certain  circumstances  be  caused 
by  excessive  investment  with  a  view  to  annual  income,  and  if 
as  it  would  seem  we  might  fairly  do,  we  rely  on  Mill's  argu- 
ment to  show  that  over-production  cannot  be  brought  about 
in  any  other  way,  we  are  certainly  forced  to  the  conclusion  that 
a  present  over-production  has  actually  been  brought  about  in 
the  way  that  has  been  suggested. 

If,  however,  further  argument  be  needed,  it  may  be  shown 
that  the  history  of  the  past  and  the  circumstances  of  the  present 
are  such  as  might  fairly  be 'expected  to  develop  a  general  over- 
production at  the  present  time.  This  century  has  seen  an 
immense  development  in  the  power  and  effectiveness  of  the 
machinery  of  production,  whereby  each  man's  labor  can  to-day 
produce  manifold  more  than  it  could  have  done  in  the  year 
1800.  The  macliinery  of  distribution  also,  —  the  railroads, 
steamships,  and  canals,  —  have  rendered  it  possible  to  bring 
cheaply  from  the  most  remote  regions  to  each  man's  door  all 
the  varied  products  of  nature  and  of  art.^  While  the  produc- 
tiveness of  each  man's  labor  has  thus  been  largely  increased, 
great  numbers  of  men,  who  had  previously  been  engaged  in 

1  The  Hon.  Carroll  D.  Wright,  in  his  report  before  referred  to,  says :  — 
**  The  mechanical  industries  of  the  United  States  are  carried  on  by  steam  and 
water  power  representing  in  round  numbers  3,500,000  horse  power,  each  horse 
power  equalling  tiie  muscular  labor  of  six  men,  —  that  is  to  say,  if  men  were 
employed  to  furnish  the  power  to  carry  on  the  industries  of  this  country  it 
would  require  21,000,000  men.  .  .  .  The  industries  are  now  carried  on  by  4,000,000 
persons  in  round  numbers.  .  .  .  The  present  cost  of  operating  the  railroads  of 
the  country  with  steam  power  is,  in  round  numbers,  $502,000,000  per  annum, 
but  to  carry  on  the  same  amount  of  work  with  men  and  horses  would  cost 
the  country  $11,308,500,000.  Tliese  illustrations  of  course  show  tlie  extreme 
straits  to  which  a  country  would  be  brought  if  it  undertook  to  perform  its  work 
in  the  old  way.  Tiie  figures  are  to  a  certain  extent  valuable  to  show  tiie  enormous 
benefits  gained  by  the  people  at  large  through  the  application  of  motive  power." 


16 

creating  the  immense  machinery  of  production  and  distribution, 
have  in  the  later  years  been  set  free  to  employ  themselves  in 
using  the  machinery  thus  created.  While  in  the  earlier  part 
of  the  century  a  large  proportion  of  the  available  labor  was 
employed  in  building  the  factories  of  all  kinds  which  now  exist 
and  the  great  network  of  railways  that  now  covers  the  civil- 
ized world,  a  comparatively  small  number  of  workmen  is  now 
required  for  that  kind  of  labor,  and  the  great  mass  are  free  to 
engage  directly  in  running  the  factories  and  the  railroads  which 
have  thus  been  built.  There  have  been,  since  our  civil  war  and 
the  Franco-German  war,  which  followed  shortly  after  it,  no 
great  wars  to  waste  and  destroy  the  products  of  labor,  and  thus 
to  turn  back  the  march  of  improvement.  Under  all  these  cir- 
cumstances it  might  well  have  been  expected  that  the  recent 
years  would  show  an  immense  improvement  in  the  material  con- 
dition of  all  classes  of  people.  Factories,  railroads,  and  ships, 
equal  to  an  immense  amount  of  production  and  distribution, 
had  been  built  and  were  in  full  operation,  and  wars  had  for 
the  time  ceased  to  divert  the  results  from  beneficence  to  mis- 
chief. It  was  clearly  a  time  for  a  very  largely  increased 
enjoyment  and  consumption  of  the  products  of  labor  by  all 
classes ;  by  the  poor  as  well  as  by  the  rich.  But  it  does  not 
appear  that  there  has  been  any  such  increase  of  consumption. 
There  has  without  doubt  been  some  increase,  but  by  no  means 
so  large  an  increase  as  the  occasion  called  for.  The  poor  have 
indeed,  both  through  greater  wages,  and  through  the  greater 
purchasing  power  of  money,  been  able  to  a  limited  extent  to 
increase  their  consumption ;  ^  but  while  this  increase  has,  in 
their  case,  been  limited  by  their  want  of  ability  to  pay  for  the 
things  which  they  desired,  in  the  case  of  the  richer  classes  the 

1  Colonel  Wright,  in  the  report  of  the  Bureau  of  Labor,  says  :  "  If  the  question 
should  be  asked,  Has  the  wage  worker  received  his  equitable  share  of  the  bene- 
fits derived  from  the  introduction  of  machinery,  the  answer  must  be,  No.  In 
the  struggle  for  industrial  supremacy  in  the  great  countries  devoted  to  mechani- 
cal productions  it  probably  has  been  impossible  for  him  to  share  equitably  in 
such  benefits." 


17 

increase  has  been  limited  by  their  disinclination  to  spend, — 
by  their  desire  to  save  that  thereby  they  might  become  richer 
than  before.  In  all  these  recent  years  the  most  accepted 
gospel  has  been  tliat  of  economy.  The  chief  end  of  man  has 
been  supposed  to  be  to  grow  rich.  Nobody  has  been  thor- 
oughly respected  in  the  community  unless  he  has,  according 
to  his  means,  been  growing  richer  every  year.  The  well-to-do 
mechanic  has  yearly  been  adding  somewhat  to  liis  deposit  in 
the  savings  bank.  The  citizen  that  had  accumulated  a  capital 
of  ten  thousand  dollars  has  been  endeavoring  by  a  life  of  econ- 
omy to  increase  that  capital  to  a  hundred  thousand.  He  that 
had  a  hundred  thousand  was  looking  forward  to  the  time  when 
he  could  enroll  himself  among  the  millionnaires.  He  that  had 
a  million  was  hoping  and  working  that  he  might  treble  or 
quadruple  his  million  before  he  died.  And  Yanderbilt,  with 
his  two  hundred  millions,  was  each  year  saving  up  many 
millions  that  he  might  therewith  acquire  new  machinery  of 
production  and  distribution.  While  there  has  been  no  at- 
tempt to  fix  a  limit  to  the  extent  to  which  the  mania  for 
accumulating  wealth  might  be  carried,  the  machinery  of  the 
law  has  been  at  work  to  curb  any  who  might  be  inclined 
to  go  too  far  in  the  other  direction,  —  he  that  has  been  de- 
sirous of  spending  more  than  his  income  has  been  put  under 
guardianship  as  a  spendthrift,  and  the  father  that  has  feared 
that  his  children  would  be  too  free  in  the  use  of  the  funds 
that  he  had  accumulated,  has  left  his  estate  in  the  hands  of 
trustees,  that  thereby  the  possibility  of  encroachment  on  the 
principal  might  be  prevented.  We  have  indeed  gone  on  in- 
creasing tlie  machinery  of  production,  unmindful  of  the  fact 
that  that  machinery  was  useful  only  so  far  as  it  created  pro- 
ducts for  consumption,  and  that,  if  consumption  failed  to  keep 
pace  with  production,  the  machinery  of  production  was,  to 
just  the  extent  by  which  consumption  lagged  behind,  useless 
and  superfluous.  We  have  increased  production  by  bend- 
ing all  our  energies  in  that  direction,  aided  all  the  while  by 


18 

the  immense  increase  in  the  effective  power  of  the  machinery 
of  production  and  distribution,  and  by  the  fact  that  years  of 
labor  spent  in  the  creation  of  that  machinery  have  brought  us 
to  a  time  when  we  are  prepared  fully  to  enjoy  its  use.  On  the 
other  hand  we  have  done  comparatively  little  for  the  increase 
of  consumption.  The  jyossiMliti/  for  such  increase  by  the  poor 
has  been  enlarged  but  little,  while  the  inclination  of  the  rich 
therefor  has  been  greatly  restricted.  Under  such  circum- 
stances what  wonder  that  production  has  run  ahead  of  con- 
sumption,—  what  wonder  that  general  over-production,  as  an 
actual  existing  fact,  has  finally  been  reached  ? 

If  the  considerations  already  offered  are  not  sufficient  to 
satisfy  the  reader  that  the  troubles  from  which  the  world  has 
suffered  in  recent  years  are  due  to  a  general  over-production 
caused  by  an  excessive  endeavor  to  accumulate  income-pro- 
ducing investments,  we  may  go  still  farther,  and  show  tliat  the 
manner  in  which  this  cause  would,  on  theoretical  grounds, 
necessarily  operate  in  bringing  about  a  general  over-produc- 
tion, corresponds  exactly  to  tlie  plienomena  which  have  actu- 
ally been  observed.  If  mankind  should  at  any  time  be  more 
bent  on  building  factories,  than  on  consuming  the  products 
of  the  factories  whicli  had  been  built,  it  is  plain  that  the 
factory  owners  must  soon  find  themselves  competing  with 
each  other  in  the  attempt  to  dispose  of  a  mass  of  products 
larger  than  the  market  of  the  time  would  call  for,  and  that 
in  this  competition  they  would  soon  be  selling  their  pro- 
ducts at  a  small  profit,  or  even  at  a  loss,  compared  with  the 
cost  of  production.  Thus,  instead  of  a  certain  number  of 
factories  yielding  liberal  returns  to  their  owners,  there  would 
soon  be  a  larger  number  of  factories  yielding  little  or  no 
returns,  —  perhaps  shutting  down,  and  dismissing  their  em- 
ployees, or  endeavoring  to  reduce  the  wages  of  those  employees, 
in  an  attempt  to  reduce  the  cost  of  production  below  the  price 
which  their  goods  would  command  in  the  market.  This  surely 
is  exactly  what  has  been  experienced  by  the  owners  of  fac- 


19 

tories.  Tlie  result  must  necessarily  be  tlie  same  with  regard 
to  any  kind  of  investment  that  has  been  fully  subject  to 
competition.  Steamships  might  be  expected  to  be,  and  as 
a  matter  of  fact  have  been,  so  numerous  that  their  owners 
have  found  it  difficult  to  obtain  profitable  employment  for 
them.  Hotels  and  apartment  houses  have  been  built  in 
excess  of  the  demands  of  the  public.  With  regard  to  rail- 
roads, the  case  might  be  expected  to  be,  and  in  fact  has 
been,  somewhat  different.  So  far  as  an  excessive  investment 
in  railroads  has  led  to  the  building  of  new  roads  in  new  terri- 
tories, which  were  not  prepared  to  support  them,  the  only  mis- 
chief has  resulted  to  the  persons  who  have  invested  in  those 
particular  roads,  while  the  railroads  previously  existing  have 
been  benefited  through  the  increased  business  thereby  brought 
to  them,  and  the  people  in  the  newly  developed  territory  have 
been  helped  by  their  new  facilities  for  transportation.  If,  in- 
deed, the  persons  who  seek  to  invest  their  funds  in  new  rail- 
roads, build  parallel  or  competing  lines,  the  same  results 
must  be  developed  as  in  the  case  of  factories,  —  and  the  new 
investor  will  not  only  get  no  profits  on  his  own  investment, 
but  will  also  destroy  the  profits  of  investments  previously  made 
by  others.  All  this,  again,  corresponds  to  what  we  have  seen. 
Comparatively  little  mischief  to  the  general  prosperity  has 
been  caused  by  the  building  of  such  roads  as  the  Northern 
Pacific,  which,  though  for  the  time  a  poor  investment  for  its 
projectors,  brought  new  business  to  connecting  roads,  and  gave 
development  and  prosperity  to  an  immense  territory.  On  the 
other  hand,  the  investment  of  capital  in  the  West  Shore 
Railroad  not  only  proved  disastrous  to  those  who  built  that 
road,  but  also  destroyed  for  the  time  the  profits  that  liad  before 
been  derived  from  the  millions  invested  in  the  New  York  Cen- 
tral. So  also  the  multiplication  of  trunk  lines  across  the 
country,  in  excess  of  the  needs  of  business,  has  led  to  a  com- 
petition between  the  different  lines,  which  has  been  disastrous 
to  them  all. 


20 

One  more  instance  of  the  correspondence  of  observed  facts 
with  results  to  be  anticipated  theoretically  remains  to  be  men- 
tioned. If  the  recent  depression  in  trade  has  resulted  from 
OTcr-investment  and  consequent  over-production,  any  particular 
country,  the  circumstances  of  which  had  given  exceptionally 
large  opportunities  for  investment  and  for  consumption,  might 
be  expected  to  have  been,  in  comparison  with  other  countries, 
relatively  exempt  from  the  evil  symptoms  of  the  depression. 
Fortunately  for  our  argument,  the  history  of  recent  years  fur- 
nishes a  striking  example  of  exactly  this  phenomenon.  At  the 
conclusion  of  the  war  between  France  and  Germany,  the  former 
country  was  left  with  its  territory  devastated  by  the  armies 
which  had  fought  within  its  borders,  —  its  factories,  its  ware- 
houses, its  dwellings,  and  its  railroads  had,  to  an  immense  ex- 
tent, been  destroyed.  Germany,  however,  had  suffered  com- 
paratively little ;  the  war  had  not  been  fought  on  its  soil,  and 
the  expenses,  which  it  had  incurred,  had  been  in  large  part  re- 
paid to  it  by  the  millions  of  the  indemnity  which  it  had  extorted 
from  its  fallen  foe.  But,  notwithstanding  all  these  facts,  which, 
according  to  all  accepted  principles  of  political  economy,  ought 
to  have  caused  the  war  to  be  followed  by  prosperity  in  Ger- 
many and  by  distress  in  France,  any  one  who  will  study  the 
history  of  those  times  will  find  that  it  was  Germany  that  suf- 
fered, while  France  prospered,  —  the  general  depression  in 
trade  at  that  time  having  been  felt  more  severely  in  Germany 
than  in  England  or  in  the  United  States,  while  France  was 
wholly  exempt  from  it,  all  her  people  being  able  to  find  work 
and  employment  in  repairing  and  making  good  the  waste  of 
the  war.  We  believe  that  this  fact,  though  easily  explained 
upon  the  theory  which  is  here  advanced,  is  wholly  inexplicable 
upon  any  other  theory  that  has  ever  been  suggested. 

Before  leaving  this  branch  of  our  subject  it  may  be  well  to 
suggest  that  the  views  here  presented  involve  no  denial  of  the 
fact  that  the  desire  to  acquire  income-producing  investments  is 
an  element  of  the  greatest  importance  for  the  development  of 


21 

human  progress.  Substantially  all  the  advance  that  has  thus 
far  been  made  in  civilization  has  been  built  on  tliis  foundation. 
The  only  claim  here  presented  is  that  this  element  may,  like 
almost  everything  else  in  human  affairs,  be  so  excessive  in 
amount  as  to  be  mischievous  rather  than  beneficial  in  its 
effects.  One  need  not  be  supposed  to  deny  or  to  decry  the 
benefit  or  the  necessity  of  food  for  the  human  body,  because 
he  endeavors  to  show  that  the  gratification  of  an  inordinate 
desire  for  food  may  result  in  injury  to  health  or  even  in  the 
destruction  of  life  itself. 

If  the  arguments  and  conclusions  set  forth  in  the  preceding 
pages  are  sound,  many  questions  arise  as  to  the  future  work- 
ings of  the  natural  laws,  the  existence  of  which  we  have  sought 
to  establish,  and  as  to  the  possible  remedies,  if  any  there  are, 
for  the  present  troubles.  The  doctrine  of  the  impossibility  of 
general  over-production  is  one  that  lies  at  the  basis  of  the 
whole  of  the  accepted  system  of  political  economy.  Mill  him- 
self says :  "  The  point  is  fundamental ;  any  difference  of  opin- 
ion on  it  involves  radically  different  conceptions  of  political 
economy,  especially  in  its  practical  aspect.  On  th6  one  view, 
we  have  only  to  consider  how  a  sufficient  production  may  be 
combined  with  the  best  possible  distribution,  but,  on  the  other, 
there  is  a  third  thing  to  be  considered,  —  how  a  market  can  be 
created  for  produce,  or  how  production  can  be  limited  to  the 
capabilities  of  the  market."  If,  as  we  have  endeavored  to 
prove,  it  is  possible  that  tliere  should  exist  a  production  which 
should  be,  in  its  general  aggregate,  in  excess  of  the  capabilities 
of  the  market,  it  is  evident  that,  as  Mill  asserts,  many  new 
questions,  which  have  heretofore  been  ignored  by  the  econo- 
mists, come  to  the  front  and  demand  an  answer ;  and  if,  as  we 
have  claimed  is  the  fact,  production  has  in  recent  years  got 
ahead  of  consumption,  whereby  much  embarrassment  to  busi- 
ness and  suffering  for  the  laboring  classes  have  resulted,  it  is 
evident  that  the  even  balance,  that  should  be  kept  between  pro- 


22 

duction  and  consumption,  cannot  be  restored  unless  either  the 
latter  element  is  increased  or  the  former  one  diminished. 

There  are  evidently  many  ways  of  reaching  either  of  these 
results.  On  the  one  hand,  consumption  may  be  increased  by 
the  action  of  government,  through  engaging  in  costly  and  de- 
structive wars,  through  the  maintenance  of  large  armies  and 
navies,  or  through  the  erection  of  costly  public  buildings  and 
public  works.  It  may  be  increased  by  the  richer  classes  through 
a  more  liberal  expenditure  on  luxuries,  or  through  a  more  gen- 
erous use  of  their  wealth  in  the  distribution  of  charities  among 
the  poor.  It  may  be  increased  by  the  poorer  classes  through  a 
fuller  enjoyment  of  the  comforts  of  life ;  but  this  mode  of  increase 
is  not  directly  dependent  on  the  simple  volition  of  the  persons 
composing  those  classes,  for,  before  they  can  increase  their  con- 
sumption, it  is  necessary  that  they  should  receive  larger  wages 
than  at  present,  or  at  least  wages  which,  if  not  larger  as 
measured  in  dollars,  will  be  larger  in  purchasing  power. 
Finally,  consumption  may  be  increased  through  the  opening 
of  new  fields  for  the  investment  of  capital,  as,  for  example,  if 
a  new  mode  of  transportation  should  be  invented,  which  should 
serve  as  a  substitute  for  railroads. 

On  the  other  hand,  production  may  be  diminished,  and  this 
also  may  be  accomplished  in  various  ways.  Production  may 
be  diminished  through  the  destruction  of  the  machinery  of 
production  and  distribution  by  war,  riots,  floods,  or  conflagra- 
tions. It  may  be  diminished  through  the  refusal  of  mankind  to 
avail  itself  of  the  assistance  of  labor-saving  machinery.  It  may 
be  diminished  by  the  enforced  idleness  of  large  classes  of  people, 
as  by  preventing  convicts  in  prisons  from  performing  any 
useful  labor,  or  by  the  temporary  closing  of  factories  and  the 
temporary  stoppage  of  machinery.  This  closing  of  factories, 
however,  though  it  has  been  practically  tried  more  than  any 
other  supposed  remedy,  is  liable  to  the  objection  that,  while 
diminisliing  production,  it  reacts  upon  and  at  the  same  time 
diminishes   consumption ;    for,   by   throwing    large   numbers 


23 

of  working  people  out  of  employment,  and  thereby  depriving 
them  of  the  means  of  purchasing  the  articles  which  they  desire, 
consumption  is  diminished,  and  the  total  result  of  the  process 
may  well  be  to  increase  the  disproportion  between  production 
and  consumption,  rather  than  to  lessen  it.  Finally,  produc- 
tion may  be  diminished  by  reducing  the  hours  of  labor  through 
the  adoption  of  eight-hour  laws  or  otherwise. 

Most  of  these  methods  for  increasing  consumption  or  di- 
minishing production,  are  liable  to  evident  objections  that 
prove  them  remedies  to  be  avoided,  rather  than  sought  for, 
—  remedies  which  are  in  fact  worse  than  the  disease  by  which 
we  have  been  afflicted.  There  are,  however,  two  of  these  sug- 
gested modes  of  relief  which  may  well  engage  our  attention. 
If  we  can  hope  to  relieve  the  depression  in  trade  by  increasing 
the  consumption  of  the  good  things  of  life  by  the  poor,  or 
by  reducing  their  daily  hours  of  labor ;  or  by  a  combination 
of  these  two  remedies,  whereby  the  poor  shall  both  enjoy 
more  and  work  less,  —  have  more  to  enjoy,  and  more  time 
to  enjoy  it  in,  —  we  surely  shall  have  reached  a  consumma- 
tion much  to  be  desired.  But  all  these  results  are  within  the 
reach  of  mankind,  provided  it  has  intelligence  sufficient  to  en- 
able it  to  grasp  them  without  contention  and  without  violence. 
The  determination  of  the  amount  of  the  daily  wages  of  the 
poor,  and  of  the  hours  of  their  daily  labor,  has  hitherto  been 
largely  in  the  control  of  the  rich,  whose  aim  has  been  chiefly 
to  prevent  increase  of  the  former  or  reduction  of  the  latter. 
Recently,  however,  the  poor  have  endeavored,  by  strikes  and 
boycottings,  to  control  these  matters  in  accordance  with  their 
own  interests,  and  to  bring  about  results  the  reverse  of  those 
sought  by  the  rich.  In  this  struggle  it  may  with  reason  be 
hoped  that  the  poor  will  attain  to  some  large  measure  of  suc- 
cess. The  success  of  the  rich  in  their  efforts  to  reduce  wages 
can  lead  only  to  an  indefinite  continuance  of  the  present  dis- 
proportion between  production  and  consumption,  and  to  riot- 
ing and  violence  by  those  who  suffer  from  want  in  the  midst 


24 

of  abundance.  The  success  of  the  poor,  on  the  other  liand, 
must  mean  increased  consumption  of  the  products  of  labor ; 
increased  demand  for  the  use  of  the  macliinery  by  which 
those  products  are  created ;  increased  income  for  the  owners 
of  that  machinery ;  and  increased  activity  in  every  branch 
of  business  and  of  labor.  In  the  interest,  then,  not  only  of 
the  poor,  but  of  the  rich,  our  sympathies  ought  to  be  with 
the  former,  rather  than  with  the  latter,  in  the  labor  troubles 
which  are  now  attracting  general  attention. 

The  fact  that  the  mischievous  consequences  of  general  over- 
production are  being  developed  at  a  time  when  the  laboring 
classes  (who  are  the  chief  sufferers  from  it)  are  beginning  to 
find  that  the  actual  control  of  the  world  is  in  their  hands,  if 
they  only  have  the  inclination  and  the  intelligence  to  grasp 
that  control,  is  an  important  element  not  to  be  lost  siglit  of  in 
any  consideration  of  the  subject.  The  laboring  classes  are  every- 
where struggling  in  a  blind  way  to  right  the  wrongs  from  which 
they  suffer ;  or,  as  some  may  prefer  to  put  it,  to  bring  about 
some  amelioration  of  their  social  condition.  As  in  the  recent 
labor  riots  in  London  and  in  Belgium,  so  there  will  always 
be  leaders  ready  to  turn  the  honest  struggles  of  the  unem- 
ployed to  the  work  of  murder,  rapine,  and  anarchy.  Tliose 
who  would  keep  the  masses  back  from  following  these  leaders 
must  be  prepared  to  hold  out  to  them  some  hope  of  relief  from 
their  troubles.  If  all  that  the  educated  classes,  if  all  that  po- 
litical science  can  say  to  the  poor  and  the  ignorant  is,  that  they 
must,  by  reason  of  some  past  errors  of  legislation  concerning 
the  currency,  or  the  tariff,  or  free  trade,  submit  to  starve  in  the 
midst  of  abundance,  we  may  well  fear  that  there  will  be  shortly 
a  sudden  upheaval  and  outburst  of  terrible  forces.  There  is 
no  subject  calling  more  urgently  for  immediate  and  careful 
study  to-day,  than  this  of  the  causes  of  the  present  labor  troub- 
les ;  but  the  subject  is  a  difficult  one,  and  there  is  a  very  gen- 
eral disinclination  to  discuss  it  except  in  the  most  superficial 
manner.      Educated    people   suppose   that    the   professors   of 


25 

political  economy  have  a  thorough  knowledge  of  the  whole  mat- 
ter, and  that  tliis  knowledge  is  so  deep  and  so  abstruse  that  it 
cannot  be  easily  acquired  by  those  who  have  not  made  a  spe- 
cial study  of  political  science.  The  professors,  on  the  other 
hand,  go  blindly  ahead,  working  out  their  old  regulation  theo- 
ries, unwilling  to  re-examine  the  foundations  of  those  theories, 
and  turning  aside  with  silent  contempt  from  any  one  who  sug- 
gests that  there  are  truths  in  political  science  of  which  they 
are  as  yet  ignorant. 

There  is  much  in  the  present  condition  of  affairs  that 
suggests  a  comparison  with  the  condition  of  France  prior  to 
the  great  Revolution  of  .1789.  Then,  as  now,  social  inequali- 
ties had  become  strongly  marked  and  exceedingly  offensive. 
The  masses,  in  their  blind  struggle  to  overthrow  the  "  divine 
rights  "  of  kings  and  the  privileges  of  the  nobility,  burst  all 
barriers,  and  created  for  a  time  a  reign  of  terror.  The  result 
was,  however,  in  the  end  a  large  recognition  of  the  equal  rights 
of  men  throughout  the  civilized  world.  Since  that  time,  and 
until  recently,  men  have  had  fair  opportunities  to  create  their 
own  position  in  the  world,  —  to  rise  by  their  own  exertions 
from  the  lowest  to  the  highest  ranks.  But  latterly  a  new  bar- 
rier has  been  growing,  and  the  distance  between  the  rich  and 
the  poor  lias  been  widening.  Yanderbilt,  Gould,  and  a  few 
others,  have  seemed  to  be  in  a  fair  w^ay  to  absorb  into  their 
own  possession  all  the  income-producing  wealth  of  the  country, 

—  at  least  all  that  large  part  of  it  which  takes  the  form  of  the 
ownership  of  railroads,  —  while  great  numbers  of  the  poor  have 
been  so  situated  that,  though  anxious  to  earn  their  living,  and 
though  surrounded  by  abundance,  they  have  been  forced  to 
starve  in  idleness.  Can  it  be  expected  that  now,  any  more 
than  in  1789,  the  masses  will  submit  quietly  to  a  lot  of  suffer- 
ing and  privation  which  they  feel  is  due  to  no  fault  of  their 
own,  while  wealth,  and  the  comforts  and  luxuries  which 
wealth  gives,  concentrate  themselves  in  the  hands  of  a  few, 

—  and-  those  few  apparently  not  the  most  deserving  ?     It  is 

4 


26 

to  be  hoped  that  the  vis  medicatrix  naturae  will  soon  cure  our 
pres.ent  troubles,  —  that  an  improved  condition  of  the  masses 
will  come  without  active  interference  from  any  man  or  body 
of  men ;  but  if  relief  does  not  come  in  this  way,  if  an  appli- 
cation of  the  heartless  laissez  faire  principles  of  tlie  economists 
does  not  promptly  work  out  relief,  we  may  expect  soon  to 
hear  of  vigorous  efforts  on  the  part  of  the  sufferers  to  ob- 
tain that  relief  by  violent  measures.  The  riots  in  London  and 
in  Belgium,  the  strikes  and  boycottings  in  England  and  in  this 
country,  the  threatenings  of  murder  and  rapine  by  socialists 
and  anarchists,  may  be  but  the  mutterings  before  a  storm 
that  is  to  break  upon  us  as  unexpectedly  as,  to  the  great 
l3ody  of  our  people,  the  fierce  storm  of  our  civil  war  broke 
upon  and  swept  over  the  length  and  breadth  of  a  country 
to  which  such  horrors  had  been  so  long  unknown  that  they 
seemed  an  impossibility  within  its  borders. 

The  unexpected  success  which  has  followed  the  strikes  that 
have  recently  taken  place  has  offered  a  hope  of  relief  from  the 
dangers  of  our  social  situation.  The  effort  had  previously  been 
to  cure  the  evils  of  the  times  by  the  old-fashioned  remedy  of  an 
increased  practice  of  economy.  The  trouble  being  that  pro- 
duction had  run  ahead  of  consumption,  we  had  tried  to  relieve 
the  situation  by  an  enforced  reduction  of  consumption,  and, 
necessarily,  a  corresponding  lessening  of  production.  Any 
-considerable  lessening  of  production  necessarily  involved  the 
enforced  idleness  of  large  numbers  of  men,  whose  labor  thus 
became  superfluous,  and  for  whom  such  enforced  idleness 
meant  loss  of  wages  and  consequent  want  and  suffering. 
This  tended  only  to  intensify  the  mischief,  and  to  lead  the 
sufferers  finally  to  violent  struggles  after  relief.  Recently, 
however,  there  has  been  opened  a  way  of  securing  a  genuine 
relief.  In  spite  of  all  the  outcries  of  the  economists  at  the 
folly  of  attempting  to  get  better  wages  for  labor,  when  busi- 
ness is  dull  and  labor  not  greatly  in  demand,  the  attempt 
has  met  with  much  success,  and  with  that  success,  if  con- 


27 

tiimed,  must  come  a  great  increase  of  consumption  that  will 
set  the  machinery  of  production  and  distribution  in  full  action, 
and  give  employment  to  all  ready  and  willing  hands.  It  ap- 
pears, however,  that  the  Knights  of  Labor,  intoxicated  by  the 
success  of  their  strikes,  will  attempt  to  carry  their  movement 
too  far ;  that,  having  succeeded  in  effecting  a  large  increase  of 
wages,  they  will  endeavor  to  effect  larger  and  still  larger  in- 
creases, until  they  attempt  that  which  is,  in  the  nature  of  things, 
impossible.  Wliat  is  to  put  a  practical  limit  to  the  progress  of 
the  movement  for  higher  wages,  it  is  not  easy  to  see ;  but 
while  we  may  hope  that  natural  laws  will  finally  check  that 
progress  in  some  peaceful  manner  before  it  has  gone  too  far, 
it  is  much  to  be  feared  that  excessive  demands  on  the  part  of 
the  laboring  classes,  especially  if  accompanied  by  acts  of  vio- 
lence, will  tend  to  check  enterprise  and  to  frighten  capital, 
and  will  thus,  by  reducing  the  demand  for  labor,  cause  the 
movement  for  higher  wages  to  result  in  an  actual  reduction 
of  wages.  If  this  result  shall  be  brought  about,  the  time  when 
the  equilibrium  between  production  and  consumption  is  to  be 
restored  will  be  indefinitely  postponed,  and  we  may  well  fear 
that  the  intervening  period  will  be  one  of  great  confusion  and 
great  suffering  throughout  the  civilized  world. 


APPENDIX. 


THERE  are  several  collateral  results  of  the  views  devel- 
oped in  tliis  pamphlet,  to  which  it  may  be  well  briefly 
to  refer. 

First.  It  may  be  remarked  that  although  an  increase  in  the 
wages  of  labor  may  in  the  future  lead  to  a  largely  increased 
demand  for  the  machinery  of  production  and  distribution,  the 
desire  to  obtain  income-producing  investments  is  so  powerful 
and  so  general  among  all  classes  of  people  that  it  is  probable 
that  the  field  of  investment  will  hereafter  remain  permanently 
overcrowded  except  when  it  may  be  cleared  for  a  time  by  the 
destruction  due  to  a  great  war,  or  by  a  new  invention  which 
shall  supersede  an  old  one  and  call  for  a  large  investment 
of  capital  in  a  new  kind  of  machinery.  Such  overcrowding 
must  mean  great  competition  within  the  field,  wherever  com- 
petition is  possible,  and  great  competition  must  mean  small 
profits  for  the  competitors.  Manufacturing  business,  there- 
fore, in  the  future,  when  it  has  no  .monopoly,  but  is  open 
to  the  competition  of  all  comers,  may  be  expected  to  return 
only  small  profits.  Railroads,  however,  when  free  from  com- 
petition, as  they  must  often  be,  and  when  free  also  from  legis- 
lative interference,  may  be  expected  to  pay  large  dividends, 
for  their  business  must  continue  to  increase  in  volume.  For 
real  estate,  advantageously  located,  a  large  increase  in  value 
may  be  anticipated,  unless  too  great  a  portion  of  the  rents  is 


30 

taken  by  taxation  to  be  wasted  or  squandered  by  incompetent 
or  corrupt  governments.  Under  these  circumstances  money 
can  of  course  command  only  low  rates  of  interest.  Periods 
of  relief  from  this  general  condition  of  affairs  may,  however, 
be  expected  to  occur,  whenever  people  are  led  (as  they  were  in 
1881  and  1882)  to  make  a  sudden  and  general  move  in  the 
direction  of  accumulating  stores  of  manufactured  products  in 
preparation  for  an  anticipated  rise  in  their  value.  But  any 
such  period  must  always  be  followed  by  a  reaction,  when  the 
general  desire  to  dispose  of  the  accumulations  has  glutted  the 
markets  with  tlie  products  that  have  been  accumulated,  and 
has  thus  interfered  with  the  regular  disposal  of  the  usual 
products  of  the  year. 

Second.  Another  consideration  resulting  from  the  views  set 
forth  in  this  pamphlet  is  this  :  If  the  closing  of  factories  and 
the  throwing  of  laborers  out  of  employment  finds  its  original 
cause  in  an  excessive  desire  on  the  part  of  the  general  public 
to  acquire  income-producing  investments,  it  would  seem  that 
the  sufferers  from  the  results  thus  brought  about  might  fairly 
have  some  claim  on  that  public,  as  represented  in  and  by  the 
government  of  the  state  or  nation,  for  relief  from  the  sufTer- 
ing  thus  created.  If  the  action  of  the  community  as  a  whole, 
through  the  general  excess  of  the  desire  to  accumulate,  is 
such  as  to  leave  labor  unemployed  and  starving  in  the  midst 
of  abundance,  may  not  the  idle  and  starving  laborers  fairly 
claim  that  the  government,  which  represents  the  community 
at  large,  shall  find  and  supply  them  with  that  labor,  that 
means  of  earning  a  livelihood,  which  individuals  have  failed 
to  furnish  ?  A  new  light  is  thus  thrown  on  the  question  of 
the  propriety  of  public  workshops  and  public  improvements 
carried  on  mainly  for  the  purpose  of  giving  employment  to 
the  idle.  The  objections  to  such  measures  on  grounds  not  here 
noticed  may  be  insuperable,  but  these  considerations  afford 
a  strong  argument  in  support  of  the  view  that  under  certain 


31 

circumstances  it  may  be  the  duty  of  a  government  to  attempt 
to  relieve  public  distress  in  this  way. 

Third.  It  may  be  remarked  that  the  theory  here  advanced 
suggests  a  way  in  which  a  protective  tariff  may  benefit  the 
country  which  imposes  it.  If,  on  account  of  its  undeveloped 
condition  or  for  any  other  reason,  one  country  affords  greater 
opportunities  and  a  larger  field  than  others  for  the  profitable 
investment  of  capital,  such  country  may,  by  limiting  as  far  as 
possible,  through  tariffs  or  otherwise,  its  communication  with 
countries  where  the  field  of  investment  has  been  crowded, 
postpone  the  evil  day  when  the  effects  of  the  competition 
among  investors  will  cause  depression  in  trade  and  general 
distress  within  its  own  borders.  Perhaps,  however,  this 
merely  shows  that  a  country  may  by  a  protective  tariff  delay 
the  march  of  its  own  progress  in  civilization,  and  thereby 
postpone  the  time  when  it  must  suffer  from  some  of  the 
necessary,  though  unpleasant,  incidents  of  that  progress. 


M  9753      C7 


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